Multiple Principal-Agent Model of SMEs Pollution Regulation under Centralized Treatment

In this paper, a pollution regulation game model under multiple principal-agent among government, pollutant treatment enterprise and Small and Medium Enterprises (SMEs) is developed to study the pollution regulation mechanism under centralized treatment mode. The optimal regulation mechanism is obtained through theoretic and numeric analysis. It is found that with the supervision costs on pollutant emission, government can not achieve the optimal social welfare but the sub-optimal through supervision and regulation; government should charge a fine as big as possible on pollutant treatment enterprise instead of SMEs to reduce the emission of untreated pollutants, and guide the price-making of pollutant treatment enterprise instead of making by itself freely, in order to increase social welfare.